AGB 212 FINAL STUDY GUIDE 2026
isoquant - Answers - captures 2 unique combinations of inputs that result in the same
level of output.
slope of iso-cost line - Answers - represented by the ratio of 2 inputs this line allows us
to use economics to determine the least-cost combination of inputs
least cost combination - Answers - use this level of inputs, point of tangency of
isoquant and iso-cost line
long run average cost curve - Answers - comprised of points on a series of of short-run
average cost curve. this helps economists to determine profitability of different operation
sizes
production possibilities curve - Answers - illustrates the maximum output for different
combinations of 2 products a firm can produce given existing resources
market supply curve - Answers - summation of all the supply curves, or the quantity
each firm would be willing to supply at each price
producer surplus - Answers - represents the profit realized by firms in the market for
specific quantities supplied
total economic surplus - Answers - consumer surplus + producer surplus measures
total welfare
MRTS - Answers - = MPPh/MPPg, slope of the isoquant
increasing returns to size - Answers - per unit costs decrease as output increases,
increased efficiency, fixed costs spread over more units of output
constant returns to size - Answers - increases in output and costs are the same
decreasing returns to size - Answers - per unit costs increase as output increases
marginal rate of product transformation - Answers - rate of substitution along the ppf,
=change in one product/ change in another
iso-revenue line - Answers - combinations of inputs that yield the same revenue, the
point of tangency of this to the PPF show revenue maximizing output of each
conditions for perfect competition - Answers - homogeneous product, many producers,
many consumers, free entry/exit
, supply elasticity - Answers - how responsive producers are to price changes change in
quantity supplied/ change in price, depends on underlying technology and supply of
inputs, always more elastic in the long run
market equilibrium - Answers - at price e consumers will be willing to buy quantity e,
and at price e producers will be willing to supply quantity e
why supply may change - Answers - changes in input prices, technology, competing
outputs
why demand may change - Answers - changes in income, prices of other goods,
seasons, tastes
excess supply signals: - Answers - the market to decrease prices, inventory builds up
things go on clearance, consumers buy more due to low price
excessive demand signals: - Answers - market to raise prices, inventories sell
out,shortages develop, firms will produce more due to higher price
market power - Answers - how much you can raise prices and still sell product, price
influence
4 determinants of the type of market - Answers - number and size distribution of sellers
and buyers, degree of product differentiation, barriers to entry, economic conditions in
the market
barriers to entry - Answers - cost of capital, economies of size, government policy
(patents, import limits)
thin markets - Answers - small market with few firms, will be less competitive
responsive markets - Answers - elastic demand and supply are more competitive than
unresponsive markets
natural monopolies - Answers - competition would result in higher prices
monopsony - Answers - only one buyer in the industry, can offer a lower price to the
seller
bilateral monopoly - Answers - only one seller and one buyer, price comes down to
negotiation
verticle strategic alliances - Answers - occur when businesses agree to do business
with each other and act as partners because business benefits both, involves a lot of
trust and dedication
isoquant - Answers - captures 2 unique combinations of inputs that result in the same
level of output.
slope of iso-cost line - Answers - represented by the ratio of 2 inputs this line allows us
to use economics to determine the least-cost combination of inputs
least cost combination - Answers - use this level of inputs, point of tangency of
isoquant and iso-cost line
long run average cost curve - Answers - comprised of points on a series of of short-run
average cost curve. this helps economists to determine profitability of different operation
sizes
production possibilities curve - Answers - illustrates the maximum output for different
combinations of 2 products a firm can produce given existing resources
market supply curve - Answers - summation of all the supply curves, or the quantity
each firm would be willing to supply at each price
producer surplus - Answers - represents the profit realized by firms in the market for
specific quantities supplied
total economic surplus - Answers - consumer surplus + producer surplus measures
total welfare
MRTS - Answers - = MPPh/MPPg, slope of the isoquant
increasing returns to size - Answers - per unit costs decrease as output increases,
increased efficiency, fixed costs spread over more units of output
constant returns to size - Answers - increases in output and costs are the same
decreasing returns to size - Answers - per unit costs increase as output increases
marginal rate of product transformation - Answers - rate of substitution along the ppf,
=change in one product/ change in another
iso-revenue line - Answers - combinations of inputs that yield the same revenue, the
point of tangency of this to the PPF show revenue maximizing output of each
conditions for perfect competition - Answers - homogeneous product, many producers,
many consumers, free entry/exit
, supply elasticity - Answers - how responsive producers are to price changes change in
quantity supplied/ change in price, depends on underlying technology and supply of
inputs, always more elastic in the long run
market equilibrium - Answers - at price e consumers will be willing to buy quantity e,
and at price e producers will be willing to supply quantity e
why supply may change - Answers - changes in input prices, technology, competing
outputs
why demand may change - Answers - changes in income, prices of other goods,
seasons, tastes
excess supply signals: - Answers - the market to decrease prices, inventory builds up
things go on clearance, consumers buy more due to low price
excessive demand signals: - Answers - market to raise prices, inventories sell
out,shortages develop, firms will produce more due to higher price
market power - Answers - how much you can raise prices and still sell product, price
influence
4 determinants of the type of market - Answers - number and size distribution of sellers
and buyers, degree of product differentiation, barriers to entry, economic conditions in
the market
barriers to entry - Answers - cost of capital, economies of size, government policy
(patents, import limits)
thin markets - Answers - small market with few firms, will be less competitive
responsive markets - Answers - elastic demand and supply are more competitive than
unresponsive markets
natural monopolies - Answers - competition would result in higher prices
monopsony - Answers - only one buyer in the industry, can offer a lower price to the
seller
bilateral monopoly - Answers - only one seller and one buyer, price comes down to
negotiation
verticle strategic alliances - Answers - occur when businesses agree to do business
with each other and act as partners because business benefits both, involves a lot of
trust and dedication
